FDA Lawyers Blog

On March 25, 2013, the U.S. Supreme Court heard oral argument in the Federal Trade Commission's ("FTC's") case challenging the Hatch-Waxman patent settlements Solvay (now owned by Abbot Laboratories) entered into with Watson Pharmaceuticals, Par Pharmaceutical, and Paddock Laboratories resolving their disputes involving Solvay's testosterone-replacement drug AndroGel®. The so-called reverse-payment settlements at issue in FTC v. Actavis, Inc., Sup. Ct. No. 12-416 ("AndroGel") involved the generic manufacturers' agreements to abandon their patent challenges and delay generic entry for nine years. The settlements also involved Solvay making certain payments to the generic manufacturers in return for backup manufacturing and marketing support. For additional background information, please see some of our more recent blogs here, here, and here.

The issue before the Court is whether reverse-payment settlements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the Eleventh and other circuits have held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit held in K-Dur).

Deputy U.S. Solicitor General Malcolm L. Stewart argued on behalf of the FTC that the Court should adopt a "quick look" rule of reason analysis under the antitrust laws whereby reverse-payment settlements will be presumptively anticompetitive unless defendants can show that the payment from the brand to the generic was for a purpose other than delaying generic entry, or the payment offered some pro-competitive benefit. Notably, this quick look approach was adopted by the Third Circuit in K-Dur. Counsel for the respondent drug companies argued that the Court should adopt the "scope of the patent defense" applied by the Second, Eleventh, and Federal Circuits finding these agreements to be lawful absent sham litigation or fraud in obtaining the patent.

On February 11, the American Medical Association ("AMA") voiced its opinions regarding the U.S. Supreme Court's upcoming review of pharmaceutical patent litigation settlements that include payments to patent challengers, commonly referred to as "pay for delay" settlements.

As explained here, pay-for-delay settlements occur in the context of pharmaceutical litigation under the Hatch-Waxman Act. In a nutshell, they involve payments from a patent holder to a generic manufacturer (who has filed an abbreviated new drug application ("ANDA") relying on the patent holder's brand-name drug product and been sued) in return for an agreement to refrain from selling the generic product for a period of time. These settlement deals have become targets of the antitrust enforcement agencies and, as widely predicted, the High Court has agreed to resolve a circuit split over their presumptive legality.

The question presented, from the 11th Circuit case FTC v. Actavis (Docket No. 12-416), is "whether reverse-payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the court below held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit has held)." The Eleventh Circuit determined that the U.S. Federal Trade Commission's ("FTC's") assertion that a patent holder was "not likely to prevail" in the underlying infringement action against generic manufacturers did not assert a valid antitrust claim because focus is "on the potential exclusionary effect of the patent, not the likely exclusionary effect," and a settlement that imposes restraints lesser than that full potential effect do not exceed the "scope of the patent." The Third Circuit, conversely, applied a "quick look rule of reason," finding that "any payment from a patent holder to a generic patent challenger who agrees to delay entry into the market [is] prima facie evidence of an unreasonable restraint of trade," rebuttable by a "showing that the payment (1) was for a purpose other than delayed entry or (2) offers some pro-competitive benefit."

On December 7, 2012, the U.S. Supreme Court granted the Federal Trade Commission's ("FTC's") certiorari petition and will address the question of whether settlements of Hatch-Waxman pharmaceutical patent litigation that include so-called "reverse-payments" are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud or, instead, are presumptively anticompetitive and unlawful.

As previously reported here, the FTC has repeatedly attacked reverse payment agreements between branded and generic pharmaceutical companies, alleging that such settlements--which the FTC also refers to as "pay-for-delay"--are a violation of antitrust laws. There is currently a split in the circuits regarding the legality of these agreements. In the decision now being reviewed by the Supreme Court, FTC v. Watson Pharmaceuticals, Inc. (involving the brand-name drug AndroGel), the Eleventh Circuit held that such settlements are legal so long as they fall within the "scope of the patent" and there is not evidence of sham litigation or fraud in obtaining the patent. Other courts have arrived at similar conclusions, including the Second Circuit (In re Tamoxifen Citrate Antitrust Litigation) and the Federal Circuit (In re Ciprofloxacin Hydrochloride Antitrust Litigation). In contrast, the Third Circuit's recent In re K-Dur Antitrust Litigation decision held that these agreements create a rebuttable presumption that the settlement is anticompetitive. Both Merck and Upsher-Smith filed petitions to the Supreme Court to review the Third Circuit's K-Dur decision; however, the Court has not yet announced whether it will grant those requests.

In AndroGel, the FTC asks the Supreme Court to adopt the Third Circuit's approach. The FTC argues that the "scope-of-the-patent approach in general, and the decision of the [Eleventh Circuit] in particular, reflect a misapplication of federal competition law." Thus, the FTC advocates for the Third Circuit's "approach, [in which] the restraints embodied in reverse-payment agreements are presumed to be anticompetitive, and the antitrust defendants--who, after all, have settled litigation against each other by agreeing not to compete--bear the burden of advancing some countervailing procompetitive virtue." (Internal quotation omitted).

The Federal Trade Commission ("FTC") on October 5, 2012, again filed an amicus curiae brief asking a federal district court in New Jersey to apply the ruling in K-Dur to an authorized generic deal. The present deal under scrutiny is an agreement in which Teva Pharmaceutical Industries Ltd. ("Teva") promised to delay launching a generic version of the drug Lamictal® (lamotrigine), while GlaxoSmithKline PLC ("GSK") granted Teva an exclusive license to market a generic product thereby excluding the marketing an authorized generic.

The FTC encouraged the District Court to apply broadly the Third Circuit ruling in K-Dur that a payment from a patent holder to a generic drug company to delay the generic from entering the market is "prima facie evidence of an unreasonable restraint on trade." In re K-Dur Antitrust Litig., 686 F.3d 197, 218 (3rd Cir. 2012). However, as pointed out by Frommer Lawrence & Haug Associate Richard Kurz in an article recently published by FDAnews, it is unclear whether the Third Circuit considered authorized generic deals in the K-Dur ruling. This particular distinction is targeted by Teva and GSK claiming that, in contrast to K-Dur, no monetary payment occurred in the agreement under question.

Nonetheless, the FTC argues that the settlement between GSK and Teva is anticompetitive and should be prohibited in view of the findings in K-Dur. According to the FTC, under the Hatch-Waxman Act, Teva was entitled to receive 180 days of marketing exclusivity during which other generics were not approved to launch their product. However, this exclusivity does not preclude the brand company from launching an authorized generic during this period thereby competing with the generic. Competition from an authorized generic has the potential to reduce the profits of the generic supplier during this period by approximately half. Thus, under the settlement terms, Teva received the benefit of extra profits, anticipated to be hundreds of millions of dollars, during its generic exclusivity period while GSK enjoyed an extended period of brand exclusivity. The FTC argues that both of theses consequences hurt consumers. The FTC also asserts that prohibiting these types of "no-authorized generic" agreements would not generally prevent settlements as feared by Teva.

On September 21, FTC Commissioner Thomas Rosch commented on the differing antitrust standards that have been adopted by the U.S. Courts of Appeals when considering the legality of pharmaceutical patent settlements that include payments to patent challengers. A recent decision by the Third Circuit, In re K-Dur Antitrust Litigation ("K-Dur"), found that such "pay for delay" settlements create a rebuttable presumption that the settlement is anticompetitive. In contrast, in FTC v. Watson Pharmaceuticals, Inc. ("Androgel") the Eleventh Circuit recently held that such settlements are legal so long as they fall within the "scope of the patent" and there is not evidence of sham litigation or fraud in obtaining the patent. Rosch believes that this split between the circuits makes it likely that the Supreme Court will decide to consider the legality of such "pay-for-delay" settlements.

Pharmaceutical patent litigation often occurs under a legal framework called the Hatch-Waxman Act, in which a generic pharmaceutical manufacturer files an abbreviated new drug application ("ANDA") with a Paragraph IV certification that the branded pharmaceutical manufacturer's patents are invalid, not infringed, or unenforceable. Under this framework, the ANDA filing allows the patent owner to file a patent infringement lawsuit against the generic manufacturer before any infringing product is sold. Unlike other patent infringement lawsuits, this framework creates a situation in which the patent owner may not have suffered a monetary loss (called damages) at the time the patent litigation is settled. This situation leads to some settlements that include a payment from the patent owner to the generic manufacturer along with an agreement that the generic manufacturer will refrain from selling an infringing product for some period of time. The FTC refers to this type of settlement as "pay-for-delay."

As Rosch explains, the FTC has attacked "pay-for-delay" settlements as a violation of antitrust laws for several years. Many courts, however, have followed the Eleventh Circuit's scope of the patent test and have found such settlements legal because a patent gives its owner the right to exclude others from selling a patented product. Further, from a judicial policy perspective, it is preferable that parties settle litigation. Indeed, using this test the Eleventh Circuit previously found that the same settlement agreement at issue in the Third Circuit's K-Dur decision was legal. Adopting a different test, however, the Third Circuit decided that the settlement is potentially a violation of antitrust laws and remanded the question to the district court for further consideration.

On August 21, FLH Partner Brian J. Malkin was quoted in an FDAnews Article on a August 17 ruling refusing to stay a ruling regarding a settlement for K-Dur® 20 (potassium chloride) that was found to be presumptively anticompetitive. As part of the settlement in question, Upsher-Smith Laboratories ("Upsher-Smith") did not agree that the patent-at-issue was valid, infringed, and enforceable, but did agree to refrain from marketing its generic potassium chloride supplement or any similar product until September 1, 2001, when it would receive a non-royalty, non-exclusive license under the patent to make and sell its generic version. Upsher-Smith also granted the innovator, Schering-Plough Corporation ("Schering-Plough") a license to several Upsher-Smith products, including Niacor-SR, a sustained niacin product. Schering-Plough also agreed to pay Upsher-Smith $60 million over three years plus additional royalties depending on its sales of Niacor-SR. After the settlement, however, Schering-Plough abandoned its plans to market Niacor-SR.

The Third Circuit originally held:

Specifically, the finder of fact must treat any payment from a patent holder to a generic patent challenger who agrees to delay entry into the market as prima facie evidence of an unreasonable restraint of trade, which could be rebutted by showing that the payment (1) was for a purpose other than delayed entry or (2) offers some pro-competitive benefit.

For more background on this case, please see one of our blogs here.

Malkin was cited in the article in the following manner:

Both brand and generic-drug makers are likely to try to find more creative ways to craft settlements if pay-for-delay deals are ultimately found to violate antitrust law, Brian Malkin a partner at Frommer Lawrence & Haug, told DID. For example, such settlements could involve more than just the drug product at issue in the case, making it less clear whether there is a pay-for-delay element.

A high court ruling against pay-for-delay could also affect companies' willingness to litigate certain patent cases, Malkin added.

Meanwhile, Congress may be waiting to see if and how the Supreme Court rules on this issue, Malkin said. A representative from Sen. Orrin Hatch's (R-Utah) office told him earlier this year that legislation targeting pay-for-delay deals is "likely on the backburner."

Meanwhile, Defendants Merck & Co. Inc. (the successor-in-interest after Schering-Plough) and Upsher-Smith have asked the U.S. Supreme Court to look into the Third Circuit's pay-for-delay ruling. In particular, the K-Dur ruling differs from other circuits that have found such payments legal in the context of a patent that is presumptively valid and an agreement to market by the expiration date of the patents-at-issue in return for ending the litigation. The U.S. Federal Trade Commission ("FTC") Chairman, Jon Leibowitz, has reportedly commended the Third Circuit for having "gotten it just right" in K-Dur,as the FTC plant to expand the holding into other cases pending in the Third Circuit and possibly other circuits pending the Supreme Court's deliberation whether to hear the appeal.

On June 12, Rite Aid and several pharmacies (hereafter "Rite Aid") filed suit against Wyeth, Inc. ("Wyeth") and Teva Pharmaceuticals USA, Inc. ("Teva") in the United States District Court for the District of New Jersey, alleging that Wyeth and Teva entered into an unlawful agreement to delay Teva's launch of extended release venlafaxine (reference listed drug Effexor XR®) and that Wyeth has unlawfully monopolized the market for extended release venlafaxine. The case is Rite Aid Corp. et al. v. Wyeth, Inc. et al., No. 3:12-cv-03523.

Rite Aid claims that Wyeth entered into an unlawful conspiracy with Teva whereby Teva agreed not to market its generic version of Effexor XR® in exchange for Wyeth's promise not to compete with Teva during Teva's period of generic exclusivity. Due to this conduct, Rite Aid alleges that generic competition was delayed for approximately two years, resulting in significantly higher prices than there would have been if competition had not been blocked. This alleged conduct, according to Rite Aid, constitutes an agreement in restraint of trade in violation of Section 1 of the Sherman Act.

In addition, according to the complaint, Wyeth fraudulently procured patents relating to extended release venlafaxine. This alleged fraud forms the basis for Rite Aid's claims of monopolization under Section 2 of the Sherman Act. In support of its allegations, Rite Aid claims that Wyeth made a series of nondisclosures and misrepresentations to the Patent and Trademark Office ("PTO") that amounted to fraud. For example, Rite Aid alleges that after certain broad claims were rejected and Wyeth agreed to narrow them to secure a notice of allowance, Wyeth abandoned the application, despite the allowance over the narrower claims. Then, according to Rite Aid, Wyeth filed a continuation-in-part patent application containing claims nearly identical to the broad claims that had been rejected earlier. A different examiner was assigned to this new application. According to Rite Aid, Wyeth did not disclose the earlier rejection to the PTO and was able to secure the allowance of the broad (previously rejected) method of use claims.

On May 30, AstraZeneca Pharmaceuticals LP ("AstraZeneca") reached an agreement to a settlement with a class of indirect purchasers in an antitrust action involving the drug Toprol-XL® (metoprolol succinate) in Delaware. The class of indirect purchasers allege that AstraZeneca used frivolous patent litigation as a method of delaying generic competition for Toprol-XL®.

In an order signed by Chief U.S. District Court Judge Gregory M. Sleet, the case was stayed following a joint notice highlighting that the parties had reached an agreement in principle to settle all claims. Mark S. Merado, the lead plaintiff in the case, filed the suit in February of 2006, alleging that AstraZeneca created a monopoly or was attempting to create a monopoly for Toprol-XL® and was thus in violation of both the Sherman and Clayton Acts.

Merado alleged that AstraZeneca fraudulently obtained U.S. Patent Nos. 5,001,161 ("the '161 patent") and 5,081,154 ("the '154 patent") and filed sham patent infringement suits against generic competitors to delay the approval and market entry of generic metoprolol succinate. "Defendants knew that under the Hatch-Waxman Act, the mere filing of patent litigation--even groundless suits based on invalid or unenforceable underlying patent--would automatically prevent the FDA, for up to 30 months, from granting generic competitors final approval," the complaint said. The suit asked the court to find the '161 and '154 patents invalid and to order AstraZeneca to provide restitution for the plaintiffs by disgorging its unjust enrichment.

by Richard F. Kurz

A February 17 news release announced that the California Supreme Court is considering whether a California state law may be used to challenge "reverse exclusionary payments" made in pharmaceutical patent litigation settlements. Sometimes referred to as "pay-for-delay" by detractors, this situation arises when a branded pharmaceutical manufacturer pays money to a generic manufacturer in the settlement of a patent infringement lawsuit. The question here is whether a suit under California's Cartwright Antitrust Act may be brought to challenge these settlements, which allegedly prolong the life of the patents at issue.

This case is particularly interesting because the dispute lies at the intersection between federal patent law (which gives patent owners the right to exclude others from making, using, or selling a patented good during the life of a patent) and California's antitrust law, which is intended promote competition. Preceding this petition, the California Court of Appeals held that these settlements do not violate the Cartwright Act if the settlement restrains competition only within the scope of the patent, unless the patent was procured by fraud or the enforcement suit was itself objectively baseless. In other words, such settlements are not violations of California's antitrust law, without more.

The petitioners, however, argue that these settlements are per se illegal under the Cartwright Act. In deciding otherwise, they allege that "the Court of Appeal accepted a misdirected line of recent federal authority that has no place in California jurisprudence" and "impose[d] a new standard on California, impairing the ability of the State and private citizens to vindicate their rights." This decision, they maintain, "offends the California public policy and public interest with respect to health care."

by Kyle Deighan

The Third Circuit on Monday heard oral arguments on the legality of a settlement between several pharmaceutical companies in In re: K-Dur Antitrust Litigation. Under the 1997 agreement, patentee Schering-Plough Corp. (now part of Merck & Co. Inc.) made a $60 million payment to generic companies Upsher-Smith Laboratories Inc. and ESI Lederle. At Monday's argument, Merck argued that the agreement was not to delay the generics entry into the market, but rather for a separate licensing agreement.

The suit, which was initiated in 2001, was brought by direct purchasers alleging that the agreements delayed generic versions of the blood pressure medication K-Dur 20 and violated the Sherman Act. Last year, a lower court determined that the agreements were not per se unlawful. Monday, Merck argued that reverse payment settlements often benefit consumers by allowing generics to enter the market sooner, before a patent's expiration date.

According to amicus appellant the Federal Trade Commission ("FTC"), so-called reverse payment agreements significantly delay generic entry into the market. They estimate that generic entry is delayed an average of 17 months as a result of these agreements. FTC argued that the decision should be vacated and sent back to the district court to determine whether the payment was to delay generic entry, or whether it was in fact for a licensing agreement.

By Julie E. Kurzrok

On November 30, 2011, Walgreen Co., The Kroger Co., Safeway Inc., Supervalu Inc., HEB Grocery Company LP, and American Sales Company, Inc., ("defendants") filed suit against Wyeth Inc. and Teva Pharmaceuticals USA, Inc. in the District Court of New Jersey under sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 & 2, and section 4 of the Clayton Act, 15 U.S.C. §15(a). The complaint alleges that Wyeth (a wholly-owned subsidiary of Pfizer) and Teva conspired to maintain a monopoly power and to delay the approval and marketing of generic versions of Wyeth's antidepressant, Effexor XR® (venlafaxine hydrochloride). Wyeth's marketing exclusivity for Effexor XR® was scheduled to end on June 13, 2008, with the expiration of U.S. Patent No. 4,535,186 ("the '186 patent"), the original compound patent for Effexor XR®.

The defendants allege that Wyeth fraudulently procured three method-of-use patents for extended release venlafaxine hydrochloride, listed them in the Orange Book, and initiated 17 sham litigations in order to manipulate the Hatch-Waxman statute and delay the entry of generic versions of Effexor XR®. The method-of-use patents are U.S. Patent Nos. 6,274,171, 6,419,958, and 6,403,120, all of which expire on March 20, 2017, nine years after the expiration of the '186 patent. Teva was the first generic company to file an Abbreviated New Drug Application for extended-release venlafaxine hydrochloride with a paragraph IV certification to the method-of-use patents (amending its 2002 ANDA).

by Kyle Deighan

On November 9, the Congressional Budget Office ("CBO") estimated that enacting a Senate bill restricting "pay-for-delay" settlements would cut the federal deficit by $4.8 billion over the next 10 years. According to the CBO, the Preserve Access to Affordable Generics Act (S. 27) "would accelerate, on average, the availability of lower-priced generic drugs affected by such agreements and generate savings to public and private purchasers of prescription drugs." Specifically, the CBO estimated that the bill would reduce spending by $4 billion, increase federal revenues by $800 million, and reduce spending subject to appropriation by $400 million between the years 2012-2021. Further, "CBO estimate[ed] that enacting [the bill] would reduce total expenditures on prescription drugs in the United States, on net, by about $11 billion over the 2012-2021 period" (which includes the $4 billion saved by federal programs).

To arrive at their estimates, CBO estimated "that S. 27 would accelerate the entry of generic drugs affected by the bill by roughly 17 months, on average. During that period, CBO estimat[ed] a generic savings rate of about 50 percent--that is, the availability of lower-priced generic drugs would reduce total spending for a given drug by roughly one-half. After accounting for the fact that S. 27 would only restrict settlement agreements entered into after November 15, 2009, CBO estimates that earlier entry of generic drugs affected by the bill would reduce total drug expenditures in the United States by roughly $11 billion over the 2012-2021 period."

The Preserve Access to Affordable Generics Act (S. 27), co-sponsored by Democrat Herb Kohl and Republican Chuck Grassley, was introduced on January 25, 2011 and recently made its way through the Senate Judiciary Committee. It is currently awaiting action in the Senate after being placed on the legislative calendar in late July. As part of its report, the CBO summarized S. 27:

S. 27 would modify how FTC conducts enforcement proceedings against parties to an agreement to settle a claim of patent infringement in specific cases. Under the bill, certain settlement agreements between drug companies would be presumed anti-competitive and unlawful; they would only be allowed if the parties can demonstrate by clear and convincing evidence that the pro-competitive benefits of the agreement outweigh the anti-competitive effects of the agreement. The agreements affected by the bill are ones in which the manufacturer of the generic version of the drug receives anything of value from the manufacturer of the brand-name drug and the generic drug manufacturer agrees to limit or forgo research, development, manufacturing, marketing, or sale of the generic drug for any period of time.

by Kyle Deighan

On September 12, Jon Leibowitz, Chairman of the U.S. Federal Trade Commission ("FTC") and staunch opponent of "pay-for-delay" settlements, once again urged Congress to restrict these types of agreements, arguing it would lower federal deficits.

Pay-for-delay settlements are agreements between innovator pharmaceutical companies and generic manufacturers in which the brand pays the generic to stay off the market or delay entry for a period of time. The FTC has long opposed these agreements as anti-competitive, arguing they tend to increase drug prices and, therefore, overall health care costs. (See some of our previous blogs on this here and here and here.) Generic drugs generally sell at a fraction of the price of their brand counterparts. When a brand and generic engage in pay-for-delay settlements, consumers (and their insurance companies or the federal government) do not get the benefit of the lower cost generic drugs until much later and are forced to continue paying for the higher priced brand product.

Monday, in a letter to the Joint Select Committee on Deficit Reduction (the so-called "Deficit Supercommittee"), Leibowitz argued that restricting pay-for-delay settlements would also lower prescription drug bills for federal health programs such as Medicare and Medicaid. He estimated that over ten years, restricting the agreements would save the government $8.8 billion dollars. Leibowitz urged the Committee to include the restrictions in recommendations it will provide to Congress on reducing the deficit.

by Michael W. Harkness

Last Thursday, the Senate Judiciary Committee cleared for debate a Bill (S. 27) designed to eliminate so-called "pay-for-delay" settlements between brand and generic pharmaceutical manufacturers. The Bill, introduced in February by Senator Herb Kohl (D-WI), can now be presented to the entire Senate floor for debate and amendment. "Pay-for-delay" settlements, also called "reverse payment" settlements, are intended to keep generic versions of patented drugs off the market for a particular amount of time, although never beyond the exclusionary life of the patent. Under the Bill, any patent infringement settlement that (1) involves the would-be generic manufacturer receiving something of value (e.g. a licensing payment), and (2) involves the generic manufacturer "foregoing research, development, manufacturing, marketing or sales of the generic product for any period of time" would be presumed unlawful.

Senator Orrin Hatch (R-UT), a co-sponsor of the Hatch-Waxman Act, released a statement after the Judiciary Committee vote, stating that he is opposed to the legislation as it would "stifle[] innovation and would make both name brand and generic drugs much more expensive." As a sponsor and major advocate of the Hatch-Waxman Act, Senator Hatch made it clear that he has been a "longtime proponent of allowing businesses to settle patent-infringement cases out of court," and his objections to Senator Kohl's proposed legislation also stems from the Bill's plan to allow "unelected Washington bureaucrats" from the Federal Trade Commission ("FTC") to control settlement negotiations between private businesses.

The Generic Pharmaceutical Association ("GPhA") issued a statement after the Committee's decision, particularly worried about the fact that "the bill includes a provision that would retroactively extend the ban on pro-consumer patent settlements to products already on the market. That means patients who today rely on safe, affordable generic medications for their treatment could potentially lose access to these medications, leaving them with only one, more expensive product as an option." Additionally, the GPhA noted in its statement that "patent settlements have never prevented competition beyond a patent's expiration, and in many cases have resulted in making lower-cost generics available months and even years before patents have expired."

by Richard F. Kurz

On May 3, the Federal Trade Commission ("FTC") issued a press release stating there was a "60 Percent Increase in Pharmaceutical Industry Deals That Delay Consumers' Access to Lower-Cost Generic Drugs" in 2010. Such settlements, dubbed "pay for delay" by some, have been under attack by the FTC in recent years.

FTC Chairman Jon Leibowitz states that "Collusive deals to keep generics off the market are already costing consumers and taxpayers $3.5 billion a year in higher drug prices." However, the Generic Pharmaceutical Association ("GPhA") challenges this, stating that the "FTC is continuing to perpetuate the myth that pro-competitive, pro-consumer patent settlements are harmful to consumers--an unsubstantiated position that has repeatedly failed to receive support in both Congress and the Courts."

The deals at issue are ones where "brand-name companies have paid generic challengers to settle their patent challenges." The FTC report analyzed 113 final patent settlements and found that 31 of these were settlements that contained a payment to a generic manufacturer and also restricted the generic's ability to market its product. The FTC noted that of these 31 settlements, 26 involved generics that were "so-called 'first filers,' meaning that they were the first to seek FDA approval to market a generic version of the branded drug." The FTC report found that such settlements delayed the entry of the generic drug by an average of 17 months longer than other settlements.

As mentioned in previous blog posts, the FTC is challenging such settlement agreements in court, contending that the agreements violate U.S. antitrust laws. Further, the FTC has been a proponent of legislation in Congress to prohibit these settlements. However, as the GPhA notes, the "FTC already has the authority to review and reject any patent settlement that it deems unlawful."